MEMORANDUM

TO: City Council

FROM: David J. Deutsch
City Manager

SUBJECT: Golf Course

DATE: November 20, 2002

The City purchased the 134-acre golf course property in 1981. The Bowie Golf and Country Club is operated by Fred Ryder Enterprises (FRE) under a lease with the City. The lease currently yields $60,000 annually to the City. The lease expires on September 1, 2011. It contains a clause for one year renewals after the termination date.

In 2000, local resident William Cartney proposed a capital expansion project at the Bowie Golf and Country Club, which he has estimated would cost $6,000,000. The proposal envisions a clubhouse/awards hall with a lounge and restaurant, an all-club driving range, and expanded parking. Mr. Cartney asserts that the debt service on a
$6 million bond issue would be covered by increased activity at an expanded facility. A staff analysis attached to the September 17, 2002 memorandum to Council calls into question the validity of the financial assumptions in Mr. Cartney's proposal. For example, the proposal suggests the annual repayment of the $6 million borrowing would be $300,000. The $300,000 would cover the principal, but interest charges could easily add $100,000 per year.

This project proposal has been reviewed by the City's Community Recreation Committee, which decided not to endorse it.

Mr. Cartney supplied an amended proposal on November 18, 2002. This revised proposal describes a $4.2 million project. The cost difference from the initial $6 million plan is comprised of the deferral of the reception hall, elimination of property acquisition, and the elimination of road improvements to Old Chapel Road. The new proposal claims that a "potential entrance" has been identified to the Fladung property that would not require the County road to be improved. No data is provided to support this assertion.

Although the revised plan is scaled back from the original, it still contains financial assumptions which appear to understate expenses and overstate revenue. The proposal shows $400,000 in annual revenue from reception hall rentals, for example, yet the text of the plan indicates the construction of the reception hall is postponed to an undetermined date.

Staff contacted the operator of the Golf Course to determine their interest in the project. The October 15, 2002 response from FRE categorically states this is not a proposal they have embraced. One point worth noting is the comment made by FRE regarding fees: "Mr. Cartney's proposal would create an upscale golf facility for the City of Bowie. However, it would also increase all fees associated with the facility in order to satisfy the debt service. As a result, golf would be unaffordable for many of the residents of Bowie."

Despite the lack of support from CRC and the lack of interest by the lessee, the Council should assess this proposal from the point of view of protecting City infrastructure and preserving a significant recreational amenity.

Perhaps some fundamental questions need to be asked:

· What actions, if any, are needed to keep the Bowie Golf and Country Club viable in the future? In the FRE letter, the operator asserts that numerous improvements have been made, and there is no major bar to continued successful operation.

· Are a clubhouse/awards hall, expanded restaurant, and an all-club driving range necessary to the continued successful operation of the Golf Course? The FRE letter says no.

· Should improvements to the leasehold property follow the model of the Sport Fit Racquet and Fitness Club which resides on City land at Whitemarsh Park? In that instance, considerable capital improvements, spanning several separate projects, were made to the facility by the lessee. In 2000, Sport Fit sought the City's participation in a joint venture in the latest project involving the construction of an indoor pool. Council chose not to participate and the lessee paid the entire cost of the project, as he has with the previous improvements.

· Would a long-term lease extension be the catalyst for the lessee to make major physical improvements? This could be easily explored with FRE.

SUMMARY

A resident has proposed a $4.2 million (previously $6 million) capital expansion project at the Bowie Golf Course. The lessee/operator is not interested in undertaking the

project with their funds. A preliminary assessment of the Cartney proposal finds significant flaws with the financial underpinnings of the proposal.

RECOMMENDATION

1. Council should direct staff to determine if FRE will undertake a capital expansion project at its own expense if the City were to grant a long-term lease extension. If FRE reacts positively, preliminary negotiations can begin at any time.

2. If FRE does not wish to pursue the capital project even with a long-term lease extension, Council should then direct staff and CRC to review this matter and report back with recommendations no later than September 2008. This schedule is a full three years prior to the expiration of the current lease.

DJD/asf

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